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EXECUTIVE SUMMARYThis report is dedicated on IS/IT outsourcing strategy, I went into deep of it conceptualframework in business alignment based on IS/IT strategies and outsourcing strategies, anddescribed reason of outsourcing, this paper expressed and demonstrated the relationship betweenIS and IT further more going deep of outsourcing strategy and reason managers consideringoutsourcing of IS/IT strategy as tools helping to achieve vision, mission and objectives. IT/ISand Outsourcing strategies can be seen as competitive weapon in today’s market, technologyenabler and business function mapping as well as both green field and IT outsourcing strategies.This paper analyzed the existing types of outsourcing and how top management using them indifferent business strategies.INTRODUCTIONOutsourcing can be defined as hiring external firm or expert service provider to perform workwhich can’t be performed by in-house may be because of lack of knowledge or costs. In otherhand can be described as business process from any organization by which a task can be given toexternal professional’s service provider or firm specialized any certain field to handle thebusiness which can’t be done in-house merely because the lack of knowledge or equipmentrequired for work done. Example they are 2 broad kinds of outsourcing “assets” and “services”outsourcing.Outsourcing strategy started 1989 when Kodak outsourced IBM for construction andmanagement, data centralized new data center, IBM provided Kodak IT equipment andprogrammers and other technical specialists. Mr. Hudson president of Kodak said “IS services,computer processing saved between 40% and 50%” through outsourcing. (Polilli, 1989).INFORMATION SYSTEMS AND BUSINESS STRATEGIESIt is vital to have the Information system and business strategy knitted. Generally, IS involves theinterconnected components working as an integral system to development, build up and facilitate 3

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circulation of information. On the other hand, IT entails all hardware that is knitted to the IS.This includes computer systems, computer networks, and the computer server.It is pertinent to distinguish among these two terms IS and IT in a way to arrange and have amomentous IS/IT strategy. It is therefore, crucial to note that information system existed in inter-organizations functions previous to advent of IT and yet as at now there are some enter-organizations that do not IT but have IS. (Ward, 2002)Information System is “interrelated components working together for collecting, processing,storing, and disseminating information to support decision making, coordination, control,analysis, and visualisation in an organization”. Likewise, are omitting the users of the IS;“people and organizations”. Thus are made different department functionalities in as whole.(Ward, 2002)IMPORTANCE OF IS/IT STRATEGIES TO MANAGERSIS/IT strategies are crucial to managers because for the organisation to survive and grow needthe mentioned core business fundamental strategies as listed in this report.Highlight four reasons managers must involved in an IS: “1. The emergence and strengthening of the global economy,2. The transformation of industrial economies and societies into knowledge- and information- based service economies,3. The transformation of the business enterprise4. Emergence of the digital firm”. 1. Global Economy EmergenceStatistics has shown that in order for companies’ capability to function globally, they need tomove their core business functions to lower salaries, in order to success in this present day and inthe nearest future. (Schilling, 2005) Argument was made that today’s enter-companies shouldhave widen their functionalities to worldwide required in order to maintain their sustainability.(Laudon, 2005) 4

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2. Business Enterprise TransformationBusiness enterprise traditional style is central point, through professionals which depended on afastened model of functioning procedural to categorize and process a lots production (Laudon,2005) The new perspective of management, similarly, deals with unofficial a set of people andnetworks to come up a given goals and objectives. (Ward, 2002) 3. The Emerging Digital FirmToday entirely firms are digitalized and automated exist due to enhance computer users since the1990’s. (Laudon, 2005) A completely digital firm “is one where nearly all of the organization’ssignificant business relationships with customers, suppliers and employees are digitally enabledand mediated” IS/IT.” For examples Dell, Cisco and Toyota going toward digital firm (Laudon,2005)DIFFERENT TYPES OF IS/IT STRATEGIES USED BYMANAGERSAn information systems strategy brings together the business aims of the company, anunderstanding of the information needed to support those aims, and the implementation ofcomputer systems to provide that information. It is a plan for the development of systemstowards some future vision of the role of information systems in the organization”. (Ward,2002)There are four basic fundamentals IS Strategy includes: 1. The Information Strategy: defined information required to achieve expectation of required, include vision, mission, and objective as primary tasks. 2. The IT Strategy: defines technological platform that is needed for support infrastructure that must be in position for Information Strategy to meet working conditions. 5

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3. The Information Management Strategy: determines information services and how is organized for example; centralised and de-centralized or in a way to share systems. 4. The Implementation Strategy: It takes into account and look at what is necessary change needed within for the IS/IT strategies to be successful in order to achieve expectations if is being implemented. (Ward, 2002)REASON MANAGERS GET INVOLVED IN OUTSOURCINGManagers involved in outsourcing because wants optimize the corporate returns throughoutbusiness and add value customer by achieving competitive advantages, core competence andcompetitive position of the firms.ISSUES AND BENEFITS ASSOCIATED WITH OUTSOURCING1. Lose of managerial controlThe time the companies enter into a contracts with outsourcing company then vendors is onewhich is performing and running these tasks therefore control activities from companies handleto the outsourcing vendors, practical the managerial control will belong to outsourcing.2. Hidden CostsOutsourcing cover the details of what services will provide to client’s company therefore theclients companies if happen pay the extra charges. Or even if didn’t pay in such manner can hirethe lawyer who stand up in the court to finalize the case on lawful solution.3. Threat to Security and ConfidentialityThe confidentiality is most important for company to run business therefore to hire and giveresponsibility to outsourcing a company’s business is no longer secured business such situationlike working on payroll systems, bank transaction design, a networking data base design andcustomize other programs related core fundamentals business then company must be careful toprotect data.4. Quality Problems 6

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The outsourcing company is critical to say that is motivated to do business because of profit.Therefore the quality of product can’t be adequate standards on the market since the contract isfixed then the outsourcing company will like to increase benefit by decreasing expenses andquality of products/services to do the tasks. (Bucki)BENEFITS OF OUTSOURCINGOutsourcing offer several benefits both side but from consumer perspective are lower costs,increasing economy, create an opportunities of new jobs, in such way that increasing demand forservices, ability for focusing on core issues and minimizing costs due financial restructuring, andbusiness innovation as well as core competence.ADVANTAGES OF OUTSOURCING 1. Costs and efficient savingThe jobs done by outsourcing in reality are inexpensive and time to deliver on the market isfaster to be deliver on the market therefore is good for company to use outsourcing companyrather than in-house because of reasonable price 2. Reduced costs overheadWhen running business sometimes requires the extra-money to pay while business is underwaytherefore back office operations are extremely high cost thus outsourcing extra-cost can easilyremoved. 3. Focus On Core ActivitiesOutsourcing is focusing in the core business fundamental which will help company to increase ofassets and expand business functionality. Since the back office functions will expand too, thusoutsources activities will refocus on these activities. 4. Develop Internal Staff 7

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If a company has a large project to run which required outsourcing skills and can’t be posses inhouse then outsourcing can work together with alongside the internal employees therefore in-house can gain knowledge and acquire new skills from outsourcing.PLANNING AN EFFECTIVE OUTSOURCING PROCESSThe effective outsourcing planning can be defined as successful ongoing business process inorder to get profit, gain core competence using multi-process of evaluation successfuloutsourcing organizations need to look forward, focusing on vision, mission and objectivesstrategies to achieve these goals. Company must identify the risks and plan how to mitigate theserisks, decide the outsourcing required and select the process of outsourcing and duration,evaluation and control the different criteria.THE REASON MANAGERS GET INVOLVED IN OUTSOURCINGThere are many reasons managers get involved in outsourcing, in early past few years ago in 20thcentury, the managers were involved in outsourcing because cost reduction, but nowadays themanagers are emphasizing; a. Expanding strategic focusIt allows the business grow to meet the objectives business fundamental, strategy focus andcore competencies, competitive advantages and core products this enabling managers to improvean essential component of strategy planning, to be able to success. The outsourcing helpsmanagers to locate highly skilled employees, reduce unnecessary staff and handle a task tospecialists to become “best practice” and business strategy “fit” of dimension outsourcingstrategy. b. To improve business processes 8

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Process improvement is other reason manager involved an outsourcing a specialists hired toperform functions better and cost companies less funds if you compare with in-house forexample managers can chose to hire call center because the outsourcing provider have trainedstaff and highly Information Technology equipment since these organization may have manyhuge number of customers thus service can be done 24/7 days a week. This improvement will bebased on competitive position to access the best practice technology. c. Cost reductionThe managers dramatically based on their experience find it easier and less expansive tooutsource the specialists from outside to perform the task instead to use the employees from in-house. Outsourcing is reducing the costs of the company based on quantitative and qualitative ofquality of products and services produced by the outsourcing. The outsourcing provides theabilities to increase the economies of scale. d. The Risk sharingThe managers involved in outsourcing normally because is easier for them to share the risk withthird party, in this case the fixed costs are belongs to service provider, who takes allresponsibilities related to equipment, staff and others and hoe services are being performed . Forexamples the call center outsourcing all technology costs belongs to outsourcing, transportationand maintenance fees, lost productivity and function but this managers must include them duringsigning a contract. (Bucki)DIFFERENT TYPES OF OUTSOURCING AVAILABLE TOMANAGERSStrategically the outsourcing available to top management are many but for quickly understand itcan be divided into 2 parties. One is Assets outsourcing for example; different types ofequipment such as removable assets and non-removable assets. Second is outsourcing servicesfor example; staff, project consultants. There different types such as offshore which described asBusiness Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) thisoutsourcing involved an Information Technology outsourcing (ITO) also related to two entitiessuch as assets outsourcing and services outsourcing. Global Delivery Model also managers used 9

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as strategy like to manage different core business process such as onsite and onshoreoutsourcing, and nearshore. (George, 2010)IMPORTANCE OF THIS STRATEGY IN THE 21ST CENTURY.Usually today important of outsourcing are based on costs reduction and increase quality ofproduction and services as well as efficiency are considered as drivers of outsourcing strategy togain competitive on the markets, strategic decision, and focus on core competencies mainimportant have been identified such as economic of scale, competitive pressure, improvingcompany focus on core products and value add, function mapping, and alignment of businessstrategies gaining access to the world class capabilities., improving business strategy and greaterpotential alignment strategy across organization.OUTSOURCING FACTORS STRATEGY IN ENVIRONMENTTECHNOLOGYIT outsourcing strategy is increasing on daily basis due to internet and digital technology and ITinfrastructure development. a. Designing IT architecture, and Innovation is one of the most factor IT strategy thus can be seen as core competence of the firms b. Business strategy and IT vision; supporting information exchange among the firms c. Deliver IS services and corporate network for maintaining competitive advantages.All these are interconnected to each other the core IS capability as helping the firms as whole tohave one relationships network to overcome transaction cost economy. The lack of analysis theenvironment, deciding which occupations to outsource and managing relationship among bothparties are the hinder factors delay the IT outsourcing strategy. (Marianne Kinnula, 2005)Outcome learningThis was very interested topic to me using the ECU material and online available journals andvarious articles, books, cases studies helped a lots go inside deeper understanding outsourcing 10

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strategy as inevitable in organization, because of it benefits, advantages, facilities bring intoorganization. As apprentice I benefited lots about IS/IT strategies and outsourcing strategies indifferent way such as case studies of DHL, UPS, DELL Infosys, and Kodak versus IBMsuccessful stories of IT/IS outsourcing strategiesCONCLUSIONToday the organizations to meet the expectations need IS/IT to support their business strategyenvironment and since IT is increasing speed and innovation is inevitable thus the outsourcingstrategies in different forms are needed to transform the organization’s business in order to meettechnology enabling, products innovation, efficient and responsiveness as well as effectivenessto meet the customers expectations, core competence, competitive advantages, cutting cost whileincreasing economy of scale through internet technology enabler IT automation are strategyconjunction of today’s business. IT outsourcing is inevitable in the multi-national companiesseems to be competitive “weapon” today’s markets and is “adaptable” by many organizations. 11